How Protectionism Kills Filipino Small Business

One of my friends in a Facebook conversation explained how protectionism weakens or even kills small/medium sized local companies in the Philippines:

Filipinos who want to expand their businesses but cannot easily get access to huge capital cannot go to foreigners as partners to fork out investment money because of the 60-40 arrangements (At least 60% Filipino ownership limit only 40% maximum for foreign owners)...

Small-time businessmen with good ideas who need to expand therefore NEED TO APPROACH THE OLIGARCHS (rich families who own big companies and participate in politics, even just by funding candidates of their choice)! And then the fricking oligarchs will SCREW the small-time/medium-sized Pinoy business-owner so that eventually, the Oligarch takes over the business and kicks out the original owner.

What's really bad is that the Oligarchs won't even use their own money either... They'll just take out LOANS from the Government (for example, the recent Meralco and PNB loan) using "friendly connections" with politicians, esp. the incumbent president at the time who is oftentimes indebted to them for their financial and manpower assistance during the presidential campaign.

And even if there are willing investors, the same snag is met, as another friend describes:

I bought the protectionism argument before. Then I got to run the family business and was looking for venture capital. We found an angel investor - the terms were split half - and he'll plow the money in - only to hit a wall with the 60/40 provisions.

And thus, small and medium businesses are choked out of the playing field. It leaves the larger, already established businesses (the oligarchs) to rule the industries they're in – making them a monopoly or at least monopolistic competition. This is why not only is it very hard but near impossible to keep aloft a small/medium enterprise in the Philippines. And without more enterprises growing in the country, there are few jobs. People are forced to go abroad and increase the risk of broken families. Not only employees, but small businessmen will just quite and go abroad instead. This is true not only for families with many members; even families with one or two children find it hard to support them with local jobs. Just think of the cost of a good education here. So salaries abroad are better suited for this.

And that is why our country is screwed up, with a lot of poverty, a growing population, broken families and lots of corruption and crime.

My View of 'Buy Filipino'

Among the purportedly patriotic movements is to Buy Filipino, which says that Filipino should only local products. It was the subject of Alex Lacson's recent letter after the Bus Hostage Crisis as one of his tips on what Filipinos should do. Much as it seems to be a noble initiative, I see a problem with it.

In the comments section of the Open Skies article at Antipinoy.com, commenter Killem was vehemently defending protectionism of Philippine companies, like PAL. The implication was that even if they deliver bad service, you must defend them. I replied:

"The important thing is the passengers, not air carriers. If the air carriers can’t deliver good service, then let them fold. Let the pilots and employees be hired by companies who have better practices and can pay their employees right. Don’t protect bad service. Don’t protect something that doesn’t deserve to be protected."

You can apply this to other Filipino services. If the only reason for protecting them is to protect their bad service, then it should stop.

If you are offended by my opinion on PAL, then consider the case of E-motion, a local animation company (in the Land of Weasels article by Ben Kritz, quoting Emil Jurado of the Manila Standard). An American company, American Vertigo, Inc. (AVI) led by a full-blooded Filipina, contracted E-Motion simply because of her sincere desire to help fellow Filipinos. After a while, E-Motion became sloppy and delivered bad service. It was time for AVI to drop a lousy supplier.

Now, instead of admitting its faults, E-Motion tried to destroy AVI by lying about them, discouraging others from taking their services and playing the victim! Thus, E-motion was ordered to fold by the Philippine Intellectual Property Office. I've heard the E-Motion survives under another name, but it sure is a bad example for Filipino companies.

In addition, more locally made stuff that I'd diss is our local television, media and movies. Our ridiculous Wowowee, Pilipinas for the Win (how ironic) and telenovela stuff only serve to propagate the culture of the poor and insinuate wrong values in people (such as dichotomizing the rich as always evil and poor as always good). That's why I boycott ABS-CBN especially and most of our local TV, and I'd rather watch programs from abroad, such as Japanese sci-fi shows, anime and Discovery Channel. Thank God for Youtube.

Also, not everything we need is made in the Philippines. We need computers to work, but no one makes computers here. Ideas on modern technology, techniques, values and principles come from abroad. The Seven Habits of Highly Effective People and universal ethics principles were not made in the Philippines; but we need them. Why Buy Filipino only when what you need is not made in the Philippines?

However, I don't say that everything made in the Philippines is crap. I once owned a Fujitsu hard drive that was made in the Philippines. It was reliable and went on for years. When I sold it to a friend eight years later, it was still working fine - attesting that Philippine-made technology could be good. Now if only economic protectionism could be removed so foreign companies could invest and revitalize our industries, and thus make more good quality products like this Fujitsu hard disk. Of course, buy it locally when it's available and when it's of really good quality.

My message is just this: Do not defend the Filipino when the Filipino is in the wrong.

But at times when the Filipino is doing the right thing and doing it right, support and uplift.